Malaysia: Manufacturing PMI hits over one-year high in November but remains stuck below threshold
The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, climbed to 49.5 in November from 49.3 in October, marking the best result since September 2018. The index has now risen for three months running suggesting the downturn in the manufacturing sector may have bottomed out in August. Nevertheless, the index remained just below the neutral 50-threshold that separates contraction from expansion in the sector. According to IHS Markit, the PMI result suggests annual GDP growth of over 5.0% midway through the fourth quarter.
The notable improvement in November was driven by new business inflows hitting a 14-month high, boosted by the first rise in new export orders in four months amid improving foreign demand from the Middle East and Asia-Pacific regions. This fed through to production, which gained traction in the survey month. Despite higher demand, firms left staff levels relatively unchanged; however, firms had adequate capacity to work through backlogs at a faster rate in November than the prior month. Turning to the outlook, manufacturers were optimistic in the year ahead thanks to expectations of stronger demand and successful contract tenders.
In terms of prices, inflationary pressures were subdued with input price inflation increasingly only slightly in November due in part to a weaker ringgit, whereas producers largely held output prices steady to remain competitive.
Commenting on the latest results, Chris Williamson, chief business economist at IHS Markit, noted:
“Firms are expecting the improving trend to continue as we head towards the year-end, with the survey’s future output expectations index running well above the lows seen this time last year. Given Malaysia’s export focus, whether these expectations turn into reality will likely depend on the twists and turns in global trade wars, but at the moment the news is looking brighter.”